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rayiner wrote:Supply/demand is the wrong way to analyze big law salaries. The market isn't an efficient market in that sense. Legal services are in some situations prestige goods, and the 50k law students aren't fungible. What's relevant is how the big firms that set the pace (S&C, STB, etc) are doing, and what alternatives the law students they hire (honors at CCN) have.

The thing that big law salaries are most tied to are housing prices in Manhattan: http://furmancenter.org/files/Trends_in ... iation.pdf (pp. 14-15). From 1989 to 2007, Cravath's starting salary increased from $82k to $160k (95%), while housing prices in Manhattan from 1989-2006 increased 94%.

Interestingly, total out of state tuition at Michigan for a C/O 1989 grad was about 38% of a Cravath first-year salary. For C/O 2007 it was 66% of a first-year's salary.

rayiner wrote:Supply/demand is the wrong way to analyze big law salaries. The market isn't an efficient market in that sense. Legal services are in some situations prestige goods, and the 50k law students aren't fungible. What's relevant is how the big firms that set the pace (S&C, STB, etc) are doing, and what alternatives the law students they hire (honors at CCN) have.

The thing that big law salaries are most tied to are housing prices in Manhattan: http://furmancenter.org/files/Trends_in ... iation.pdf (pp. 14-15). From 1989 to 2007, Cravath's starting salary increased from $82k to $160k (95%), while housing prices in Manhattan from 1989-2006 increased 94%.

Interestingly, total out of state tuition at Michigan for a C/O 1989 grad was about 38% of a Cravath first-year salary. For C/O 2007 it was 66% of a first-year's salary.

Median home prices aren't changing because no one's really buying, except at the super high end. Instead, rents are skyrocketing.

AFAIK these figures are the average of condo and co-op prices in Manhattan, which would take into account rising rent, right?

No. Those are both types of owner-occupied apartments. The rental market is entirely separate. NYC really is different from most cities because even older, relatively affluent people are predominantly renters. Fluctuations in rent prices are what impact the majority of New Yorkers, including professionals like lawyers; home ownership is kind of a luxury good.

dixiecupdrinking wrote:No. Those are both types of owner-occupied apartments. The rental market is entirely separate. NYC really is different from most cities because even older, relatively affluent people are predominantly renters. Fluctuations in rent prices are what impact the majority of New Yorkers, including professionals like lawyers; home ownership is kind of a luxury good.

Renzo wrote: And in biglaw, retention isn't about where are people going to go and make more, it's a matter of "are we paying these miserable fucks enough to keep them from quitting to go work sane hours at half the salary."

This. People leave big law to earn less and also feel less suicidal, not to earn more. The point about retention is that when the market heats up (and it is) more opportunities for less shitty (and likely less well remunerated) jobs open up and firms start losing attorneys. They mess with salary and bonus to try and lose fewer attorneys.

As for base salary vs. bonuses vs. the supply of law students vs. the quality of those students vs. any number of other factors, it's all black magic figured out by the firms. A global base salary increase doesn't seem likely, but it's hardly out of the question just because there are more law students than big firm jobs. That's always been (extremely) true. At the height of the contraction we were looking at maybe 50K law students / year for maybe 4K big firm jobs; at the height of the boom it wasn't likely any more than 45K students / 6K big firm jobs. Salaries went up then even though the supply was super-saturated. The fact that it's more super-saturated now can't be terribly relevant, per Renzo's reasoning.

Supply/demand is the wrong way to analyze big law salaries. The market isn't an efficient market in that sense. Legal services are in some situations prestige goods, and the 50k law students aren't fungible. What's relevant is how the big firms that set the pace (S&C, STB, etc) are doing, and what alternatives the law students they hire (honors at CCN) have.

The thing that big law salaries are most tied to are housing prices in Manhattan: http://furmancenter.org/files/Trends_in ... iation.pdf (pp. 14-15). From 1989 to 2007, Cravath's starting salary increased from $82k to $160k (95%), while housing prices in Manhattan from 1989-2006 increased 94%.

Interestingly, total out of state tuition at Michigan for a C/O 1989 grad was about 38% of a Cravath first-year salary. For C/O 2007 it was 66% of a first-year's salary.